Oppenheimer analysts Chris Kotowski and Kevin Tripp provided expectations on financial stocks for this year.

The analysts write that, at the start of the year, they were optimistic about a significant rebound in M&A and financing activity.

The key factors for a bullish stance at that time included higher demand after relatively quiet M&A years in 2023 and 2024, tightened credit spreads, and peaking interest rates that were stable to lower.

Nevertheless, there has been no clear sign of an M&A rebound so far this year. Disclosed M&A activity is up just 2.4% year-to-date and equity capital markets (ECM) is up 2.7%, adds the analyst.

Also, the analysts are concerned that the current uncertainties around tariffs, fiscal "detox,” and the disruption of long-standing trade and security arrangements may pause in M&A activity.

Consequently, the analysts slashed the estimates for Goldman Sachs Group, Inc. ( GS ) and Jefferies Financial Group Inc. ( JEF ) .

This reflects subdued Dealogic revenue projections and an assumption that investment banking revenues will remain flat for the remaining three quarters of 2025, compared to prior expectation of a return to a normal investment banking “wallet” growth aligned with GDP, adds the analyst.

Notably, the analysts had earlier set the 2025 investment banking revenue forecasts to increase by 32% (still below 2021 levels) and 14%, respectively.

Also, 2026 estimates are revised assuming the year starts at current levels and ends with a normalized wallet relative to GDP, adds the analyst.

Consequently, they have reduced 2025 and 2026 estimates by 12.5% and 6.9% for Goldman Sachs ( GS ) and 20.7% and 10.5% for Jefferies, respectively.

Apart from this, the analysts downgraded The Carlyle Group Inc. ( CG ) to Perform from Outperform.

The analysts believe that the company is highly reliant on returning significant capital to LPs to support the next generation of flagship private equity funds.

While CG has several matured investments ready for monetization, this process is likely to be more challenging than initially anticipated, adds the analysts.

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